Seeking a Worthy Container Line Stock ...

MarineLink.com
Thursday, June 20, 2013
OOCL Container Ship HK Harbour: Photo CCL

Asian container liner finances are put under the microscope in a recent Drewry Maritime Equity Research report.

It is a challenge to find an investable container shipping stock in the current environment. Most companies have seen their cash balances wither and total industry debt has more than doubled in the past five years to USD 100-bn.

Drewry’s analysis of the financial health of the industry paints a grim scenario for the global container liners with financial health under severe strain and shareholder value eroded. Most financial indicators point towards a greater need for the industry and in particular the listed carriers to get their house in order before it gets too late. If there is any positive aspect for the wider industry, the current financial pain will limit carriers’ ability to fight purely for market share. Drewry expects to see intermittent market-share campaigns but no single carrier can do it on a sustained basis.

Rahul Kapoor, senior analyst at Drewry Maritime Equity Research stated, “Even as the market awaits the fate of 1st July Asia-Europe GRIs, the sheer collapse in Asia-Europe freight rates in the past two months shows how fickle the industry's demand supply balance remains.  Short term, industry profitability has become highly volatile, driven not only by underlying supply demand dynamics but increasingly by carriers’ actions with respect to short-term capacity management. Accurate forecasts on a recovery in 2014 are especially difficult since the industry dynamics are highly fluid. Longer term, we expect the industry to be plagued by over capacity and the global supply/demand balance will not reach equilibrium until 2016.”

Kapoor continued “Lastly, peak season is a make or break for 2013 profitability. Freight rates have crashed on the key Transpacific and Asia-Europe trade lanes and there are few indications of a favourable demand environment. Carriers have a narrow window of opportunity to get their act together or risk severe losses as they are losing a lot of money at current rate levels. With no likelihood of an imminent demand surge, the only way to minimize losses is to address effective capacity immediately, or else any hope of full-year profitability can be written off after a very weak second quarter. Having said that, carriers can still expect to achieve GRI success outside of supply/demand fundamentals, if they were to take a hard-line and aim for profitability.”

Drewry Maritime Equity Research’s top stock currently, with an attractive valuation and positive outlook, is Orient Overseas Int Ltd (316 HK). Whilst also taking a cautious view on both Neptune Orient Lines (NOL SP) and China Shipping Container Lines (2866 HK).


 

Maritime Reporter September 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Wärtsilä Expects 5% Sales Growth

Wärtsilä announced its third quarter results, reporting that it sees good development in order intake and profitability. According to Wärtsilä, third quarter

MacGregor Reorganizes into 7 Operative Divisions

MacGregor, part of Cargotec, announces changes in its operative structure and starts a reorganization into seven operative divisions which will become effective on January 1, 2015.

Iridium Partners with Trimble to Support Expansion

Iridium Communications Inc. announced an agreement with Trimble that expands the company's use of satellite communications in its core Transportation and Logistics

Finance

Wärtsilä Expects 5% Sales Growth

Wärtsilä announced its third quarter results, reporting that it sees good development in order intake and profitability. According to Wärtsilä, third quarter

Yara Reports Strong 3Q Results

Yara International ASA delivered strong third-quarter results, with record fertilizer deliveries and continued margin benefit from lower European gas price. "Yara

Lerwick Port Awards £16.5 mi Expansion Contract

Lerwick Port Authority has awarded a construction contract for the latest expansion of the harbour’s facilities in a project costing a total of £16.5 million

Container Ships

Containers, Cruises Help Boost Marseilles Fos

Container throughput at French port Marseilles Fos reached 876,711 teu for the period January to September, an increase of 6% on the first nine months last year.

Iridium Partners with Trimble to Support Expansion

Iridium Communications Inc. announced an agreement with Trimble that expands the company's use of satellite communications in its core Transportation and Logistics

VT Halter Begins Building LNG-powered ConRo Ships for Crowley

VT Halter Marine, Inc., a subsidiary of Vision Technologies Systems, Inc. (VT Systems), has commenced construction on the first of two liquefied natural gas (LNG)-powered,

 
 
Maritime Contracts Maritime Security Maritime Standards Naval Architecture Navigation Pipelines Pod Propulsion Ship Electronics Ship Repair Shipbuilding / Vessel Construction
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.2788 sec (4 req/sec)